Under Armour’s revenue last quarter wasn’t led by its popular line of athletic shoes, apparel and accessories as the company continues to struggle from declining retail sales, but by a newer technology division that involves collecting athlete data.
The company is looking to transition from a retail company into one of the world’s largest connected fitness brands. And while it hit a few hiccups along the way — which led to a decision this quarter to shut down the hardware portion of its connected fitness business, Under Armour Healthbox, which included its line of fitness bands — it seems to be hitting a stride with a renewed focus on software.
In the company’s most recent fiscal quarter, Under Armor reported 16 percent revenue growth, which put it among the fastest two areas of revenue growth for the retail giant alongside its licensing business, which also benefitted from a 16 percent increase in revenue.
Both of those divisions far outpaced sales of apparel, footwear and accessories. Apparel revenues declined by 8 percent during the third quarter, while footwear revenue climbed by just 2 percent and accessories by 1.4 percent.
Connected fitness is still a tiny portion of Under Armour’s overall business by revenue, with revenue of $23.4 million last quarter representing a drop in the bucket compared with apparel’s revenue of $939 million. But its quick pace of growth signals a new area of focus for the company as it looks to connect its sportswear to the digital world.
On a call with analysts last week following its earnings report, Under Armour Chief Operating Officer Patrik Frisk said the company is releasing its first shoe with its new HOVR foam technology that will also feature an “embedded connected sensor that will track distance, cadence, pace and shoe life.”
Other companies, including Sensoria, have launched similar products that promise to track runs via chips embedded in apparel. But the Under Armour connected shoe is noteworthy because it will tie that data into its overall connected fitness strategy, which includes an established global community of more than 220 million registered users, which Under Armour amassed mostly through its acquisition of three running apps: MapMyFitness, EndoMondo and MyFitnessPal.
“The HOVR launch demonstrates the first true manifestation of digital, meaning physical, providing runners with advantages that make them better, smarter and capable of more than they ever knew possible,” Frisk said. “Our Connected Fitness strategy stretches beyond connected shoes with an ecosystem of nutrition, sleep, activity and fitness.”
The company, he said, will continue to invest in products and initiatives in digital health and fitness, focusing on both athlete performance and recovery, while aiding in injury prevention.
Similar to how Apple uses its software upgrades to drive more sales of hardware and how Fitbit has built an online community to encourage more fitness tracker sales, Frisk says Under Armour will ultimately use its connected platform and the data it collects about customers to sell “more shirts and shoes” and tweak its go-to-market strategy.
“The combination of this rich data set will help to more clearly define our global consumer target,” he said. “What’s happening right now is a change in the consumer, how the consumer chooses to engage with our brand and how they choose to shop our brand. Achieving our growth potential means we need to continue to fuel the brand to maximize our connection with consumers.”
